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Typically this is how these companies work: Instead of obtaining a new loan to pay off your credit cards, the debt management company tries to negotiate with the credit card companies to reduce your interest rates or otherwise lower your monthly payments.
Each month, you make a single payment to the debt consolidation firm and it distributes a portion of your payment to each of your creditors.
The amount of your monthly payment will depend on the total amount, interest rate, and payment terms of your consolidation loan.
There are thousands of companies that claim they can help you consolidate or manage your credit card debt so that you pay less or reduce your payment.
If your new monthly obligation is substantially lower, it usually means a longer repayment term.
If your repayment term is extended when you consolidate, it may take you significantly longer to pay off your credit card debt.
Even if the consolidation reduces your monthly payment, you still have to pay off all of your debt.
So if you don’t have regular income or can’t afford your monthly payment, consolidating your credit card debt will not help you get back on track.
However, don’t assume that your payment went down solely because of a lower interest rate.If you are struggling to pay off multiple credit cards, consolidating your debt may allow you to reduce your interest rates and lower your monthly payment.However, a lower monthly payment can mean a longer repayment term and more interest paid over the life of the loan.If you have a credit score of 720 or higher, you may be able to score an annual percentage rate (APR) as low as 4.99%, provided you qualify for at least two rate discounts.The rate discounts are given when you add a co-borrower who has sufficient income to support loan repayment, you use at least 50% of the loan to directly pay off creditors, or you have at least ,000 in retirement savings.